Balancing economic and ecological functions in smallholder and industrial oil palm plantations.

The expansion of the oil palm industry in Indonesia has improved livelihoods in rural communities, but comes at the cost of biodiversity and ecosystem degradation. Here, we investigated ways to balance ecological and economic outcomes of oil palm cultivation. We compared a wide range of production systems, including smallholder plantations, industrialized company estates, estates with improved agronomic management, and estates with native tree enrichment. Across all management types, we assessed multiple indicators of biodiversity, ecosystem functions, management, and landscape structure to identify factors that facilitate economic-ecological win-wins, using palm yields as measure of economic performance. Although, we found that yields in industrialized estates were, on average, twice as high as those in smallholder plantations, ecological indicators displayed substantial variability across systems, regardless of yield variations, highlighting potential for economic-ecological win-wins. Reducing management intensity (e.g., mechanical weeding instead of herbicide application) did not lower yields but improved ecological outcomes at moderate costs, making it a potential measure for balancing economic and ecological demands. Additionally, maintaining forest cover in the landscape generally enhanced local biodiversity and ecosystem functioning within plantations. Enriching plantations with native trees is also a promising strategy to increase ecological value without reducing productivity. Overall, we recommend closing yield gaps in smallholder cultivation through careful intensification, whereas conventional plantations could reduce management intensity without sacrificing yield. Our study highlights various pathways to reconcile the economics and ecology of palm oil production and identifies management practices for a more sustainable future of oil palm cultivation.

Understanding German farmers' intention to adopt drought insurance.

Climate risks, particularly droughts and heat waves, negatively affect agricultural incomes worldwide. Drought insurance is promising to mitigate resulting income losses at the farm level. As the proportion of German farmers insured against drought is low, policymakers and insurers aim to increase the appeal of drought insurance to farmers. However, to accelerate their efforts in this regard, more information regarding farmers' intention to adopt drought insurance beyond current adoption is needed. To obtain initial insights, we surveyed 127 German farmers in a risk management context and applied a modified transtheoretical model of behavioral change. This revealed detailed information on the gradual adoption of drought insurance. Given a heterogenous distribution among the gradual stages of adoption, a binomial logit model was estimated instead of an ordered logit to investigate farmers' current intention to adopt drought insurance. Furthermore, the machine learning technique of least absolute shrinkage and selection operator (LASSO) was applied to select the most relevant features to be used as explanatory variables in the estimation. The results show that farmers' gender and risk attitude, land tenure, how severely they were affected previously by weather risks, and the level of trust in index insurance products have a statistically significant effect on farmers' intention to adopt drought insurance. Additionally, this study provides insights into farmers' reasons against drought insurance. As such, the results are important to policymakers considering policy intervention, insurers interested in farmers' intention to insure and to researchers focusing on farmers' adaptation to climate change.

The effect of poor vision on economic farm performance: Evidence from rural Cambodia.

Roughly one-fifth of the global population is affected by poor visual acuity. Despite the fact that inhabitants of rural areas in low-income countries are most distressed by this, no prior research has studied the impact of poor visual acuity on the economic performance of farms. We conduct a standardized eye test with 288 farm managers in rural Cambodia and find that around 30 percent of our sample suffers from poor visual acuity in terms of nearsightedness (myopia). Our analyses indicate a statistically significant and economically meaningful association of poor visual acuity with economic farm performance. Our results show that gross margins for cropping activities per year could be, on average, around 630 USD higher if farm managers were able to correct for poor vision. Our results suggest that poor visual acuity impairs farm managers from tapping the full potential of their business, which in turn decreases their chance to break the vicious cycle of poverty.

Farmers' willingness to pay for digital and conventional credit: Insight from a discrete choice experiment in Madagascar.

In recent decades, microfinance institutions with financial products designed for low income groups have been established all over the world. However, credit access for farmers in developing countries remains low. Digital financial services are rapidly expanding globally at the moment. They also bear great potential to address the credit needs of farmers in remote rural areas. Beyond mobile money services, digital credit is successively offered and also discussed in literature. Compared to conventional credit which is granted based on a thorough assessment of the loan applicant's financial situation, digital credit is granted based on an automated analysis of the existing data of the loan applicant. Despite the potential of digital credit for serving the credit needs of rural farmers, empirical research on farmers' willingness to pay for digital credit is non-existent. We employ a discrete choice experiment to compare farmers' willingness to pay for digital and conventional credit. We apply loan attributes which reflect typical characteristics of both credit products. Our results indicate a higher willingness to pay for digital credit compared to conventional credit. Furthermore, we find that the proximity to withdraw borrowed money has a higher effect on farmers' willingness to pay for digital credit compared to conventional credit. Furthermore, our results show that instalment repayment condition reduces farmers' willingness to pay for digital credit whilst increasing their willingness to pay for conventional credit. Additionally, we find that longer loan duration has a higher effect on farmers' willingness to pay for digital credit compared to conventional credit whereas higher additional credit cost has a lower effect on farmers' willingness to pay for conventional credit compared to digital credit. Our results highlight the potential of digital credit for agricultural finance in rural areas of Madagascar if a certain level of innovation is applied in designing digital credit products.

Promises and pitfalls of digital credit: Empirical evidence from Kenya.

Digital credit is a recent innovation that raises hopes of improving credit access in developing countries. However, up until now, empirical research on the extent to which digital credit actually reaches people who are otherwise excluded from conventional credit markets and whether increased credit access is sustainable or threatened by high default and blacklisting rates is very scarce. Using representative data from Kenya, this article shows that digital credit increases borrowing opportunities, including for people less likely to otherwise have credit access in the conventional credit markets. However, we find that digital credit borrowing is also responsible for 90% of all blacklistings, which is partially driven by higher default rates in the digital credit market but also by a higher probability that digital credit defaults lead to blacklisting of the borrower, compared to defaults in other credit markets.

The former Iron Curtain still drives biodiversity-profit trade-offs in German agriculture.

Agricultural intensification drives biodiversity loss and shapes farmers' profit, but the role of legacy effects and detailed quantification of ecological-economic trade-offs are largely unknown. In Europe during the 1950s, the Eastern communist bloc switched to large-scale farming by forced collectivization of small farms, while the West kept small-scale private farming. Here we show that large-scale agriculture in East Germany reduced biodiversity, which has been maintained in West Germany due to >70% longer field edges than those in the East. In contrast, profit per farmland area in the East was 50% higher than that in the West, despite similar yield levels. In both regions, switching from conventional to organic farming increased biodiversity and halved yield levels, but doubled farmers' profits. In conclusion, European Union policy should acknowledge the surprisingly high biodiversity benefits of small-scale agriculture, which are on a par with conversion to organic agriculture.

Land-use choices follow profitability at the expense of ecological functions in Indonesian smallholder landscapes.

Smallholder-dominated agricultural mosaic landscapes are highlighted as model production systems that deliver both economic and ecological goods in tropical agricultural landscapes, but trade-offs underlying current land-use dynamics are poorly known. Here, using the most comprehensive quantification of land-use change and associated bundles of ecosystem functions, services and economic benefits to date, we show that Indonesian smallholders predominantly choose farm portfolios with high economic productivity but low ecological value. The more profitable oil palm and rubber monocultures replace forests and agroforests critical for maintaining above- and below-ground ecological functions and the diversity of most taxa. Between the monocultures, the higher economic performance of oil palm over rubber comes with the reliance on fertilizer inputs and with increased nutrient leaching losses. Strategies to achieve an ecological-economic balance and a sustainable management of tropical smallholder landscapes must be prioritized to avoid further environmental degradation.